GREY VOTE SEES RED

Winning back the confidence and support of the millions of pensioners who vote Labour is the most vital task facing the Party between now and the General Election. Seats could be lost simply on pensioner votes unless we do something now. If this message alone emerges from today's conference and is acknowledged by the Party leadership, then we will have made a major contribution to achieving Labour's second term and holding those Labour seats won in 1997.

Merely re-packaging current policies, trying to sell the same message in different words will not be enough. It is not working now, and it could go badly wrong for us in the General Election campaign. Substance has to change. We have to have something the pensioners can cheer about as they cast their votes for Labour next time.

The 75p increase this year brought home to all pensioners that increasing the State pension only in line with prices means that its value relative to other incomes has been falling. Only by linking pension increases to earnings, which generally rise more quickly than prices, will the pensioners be assured that they are not going to be left behind as prosperity rises for the rest.

Earnings link

But restoring the earnings link is not of itself going to solve the problem. Pensioners' incomes are far too low and must be significantly increased. The Tories cut the earnings link nearly 20 years ago and as a result a single pensioner is now around £30 a week worse off. Simply re-linking pensions at their present levels to earnings will do nothing to bridge that £30 gap which arose under the Tories. A significant increase in the state pension, above and beyond earnings-linked annual increases is necessary. Recent work by Age Concern suggests that simply to avoid living in poverty, a single pensioner requires £99 a week and a pensioner couple £149 per week. Even these levels are very low by international standards.

The Sunday Mirror reported on July 2nd that in Germany a single pension is £250 a week, in France a single person's pension is £230, in the Netherlands £242 and in Belgium £228. These are all between three and four times the British state retirement pension. It is clear that the British state retirement pension is unacceptably low and another £3 a week, or even £5 a week, will not seriously address pensioner poverty in Britain.

The Government argues that Labour has done much for pensioners since coming to office, and that significant sums of money have been allocated to them already. This is true. but the Government also says that it has targeted the poorest pensioners. Sadly this argument does not really stand up to examination. The reduction in VAT on domestic fuel went to every household in the country, rich and poor, young and old.The Government has also increased the winter allowance from £10 to £150. This is very welcome to many pensioners, but it is not targeted on the poor. All pensioner households qualify for the allowance and it is untaxed, which means that the wealthy of pensionable age benefit equally. A similar argument applies to the television licence payments to the over 75s, another tax-free grant to rich and poor alike.

Means testing

There is also the problem of means testing and the Minimum Income Guarantee. Means testing at the lower end of the income scale merely churns income between the less well off and the very poor. It undermines the very basis of the universalist welfare state. Earnings-related National Insurance Contributions and a redistributive tax system should provide the resources needed. Means testing is expensive and inefficient, and many do not receive their means-tested benefits simply because they find applying daunting or distasteful.

Restricting means-testing would promote social justice and reduce expensive bureaucracy. One simple measure could be to convert the Minimum Income Guarantee into the basic state pension as a first step towards righting the wrongs committed against pensioners by the Tories.

This paper does not attempt to quantify costs or to compute all the numbers, although it is obvious that to increase the basic state pension and re-link it to the earnings index would not be cost free. However, some of the measures already taken by Labour could be unravelled with the proceeds built in to the state pension. Ministers constantly remind us that they have spent more on these measures than they would have done had they re-linked pensions to earnings after Labour's election victory.

Acceptable levels

However, redistributing such Government spending alone would not be enough to raise pensions to acceptable levels. More money would have to be found. Extraordinarily, substantial sums are already available, because the National Insurance Fund currently has a very large surplus which is increasing every year. A measured increase would therefore be affordable even from currently available resources.

To give a more significant boost to pensioner incomes, some additional income would have to be raised. Increasing National Insurance Contributions to a sufficient level and ensuring that they too rise in line with earnings is a necessary and desirable step if we are to ensure that the contributary principle is retained and that there is sufficient income to pay proper pensions in the future. Raising the upper earnings limit on National Insurance contributions would also be a way forward, and one which would be politically acceptable and cause minimal electoral damage to Labour.

If our Government puts it to the electorate that eliminating poverty for the elderly will mean increasing National Insurance contributions, this would surely be popular and acceptable. The whole population is either old or going to be old one day. No one wants to face the prospect of poverty in old age.

Moreover, millions in the working population have elderly parents and they would surely support better pensions for their own. Our Labour government can promote social justice and be popular at the same time. Raising the state pension and restoring the earnings link would be immensely popular, re-affirm Labour's historic commitment to social justice and equality and keep the Tories out of power for the foreseeable future.